The Biden administration is granting the IRS an extra $80 billion under the newly passed Inflation Reduction Act
I have seen some of my competitors use it to fuel their fear tactics like the example below published by Moody’s and I must address it.
“Overall with the 87,000 new agents the IRS will become larger in numbers than the Pentagon, State Department, FBI, and Border Patrol combined. Many are arguing the US could certainly use 87,000 more teachers, nurses, mental health workers or border agents who are stretched thin right now at the Southern Border – before IRS Agents. But let’s remember that those much needed hires wouldn’t result in the return on investment that 87,000 IRS Agents will. And they get to carry a gun.
This move allows the IRS to go into what the Wall Street Journal calls “beast mode”. They will be focused on bill enforcement and collection like never before, and someone is going to have to foot the bill for this extravagant spending. So, who do you think the IRS will target with future audits to help recoup the costs? You and the other 9+ Million U.S. Citizens living abroad?”
You see, the IRS will hire 87,000 new employees, including auditors. $45.6 billion, more than half of that budget has been earmarked towards enforcement.
This is a large amount of money. $80 billion is more than six times the current annual IRS budget of $12.6 billion. Of course, the IRS processes tax returns for almost every citizen, as such it makes sense that it’s less than the annual FBI budget of $9.75 billion, leaving alone other agencies with an ever smaller mandate.
With that being said, the IRS has been severely underfunded for almost a decade, so this inflow of money is very welcomed. How underfunded was it? Try calling the IRS to get the picture.
Some of that enforcement will be targeting US citizens overseas. I expect it to focus on foreign corporations and high-wealth individuals. And of course, the IRS is focusing on cryptocurrency compliance, although it is not focused on US citizens overseas, it would impact those in that situation.
Overall, with the 87,000 new agents, the IRS will become larger in numbers than the Pentagon, State Department, FBI, and Border Patrol combined. And that makes complete sense, since again; the IRS is monitoring the tax situation of every US citizen. In other areas, the federal agencies are focused on the more serious crimes, with more routine investigations being conducted by state and local agencies.
And some IRS agents will get to carry guns, which should be of little significance since they can’t use them overseas. Most audits for US citizens overseas will be correspondence audits.
We want our clients to make an informed decision. We reject the idea of coercing those who contact us into becoming clients by using and abusing fear tactics.
We recommend everyone to be in compliance, especially if you have a foreign corporation, high net wealth, or had cryptocurrency capital gains. We will never imply that an IRS agent carrying a gun will knock on your door, outside the US.
With that being said, now is indeed a good time to get into compliance:
– If you didn’t file tax returns for years, you probably didn’t receive your covid 19 stimulus checks. It is not too late to request a refund on your 2020 & 2021 tax returns. In most cases, it will amount to 1,800 USD and 1,400 USD respectively.
– If you consider renouncing US citizenship and are concerned about becoming a covered expatriate by virtue of having a net wealth of more than $2 million, with the current stock market, cryptocurrency valuations (and to a lesser extent real estate), now is a good time if you temporarily have a net wealth of less than $2 million.
Have a question? Contact Oliver Wagner, 1040 Abroad.
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